Correlation Between Global Bond and Value Equity
Can any of the company-specific risk be diversified away by investing in both Global Bond and Value Equity at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Global Bond and Value Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Bond Fund and Value Equity Investor, you can compare the effects of market volatilities on Global Bond and Value Equity and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Global Bond with a short position of Value Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Bond and Value Equity.
Diversification Opportunities for Global Bond and Value Equity
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Global and Value is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Global Bond Fund and Value Equity Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Equity Investor and Global Bond is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Global Bond Fund are associated (or correlated) with Value Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Equity Investor has no effect on the direction of Global Bond i.e., Global Bond and Value Equity go up and down completely randomly.
Pair Corralation between Global Bond and Value Equity
Assuming the 90 days horizon Global Bond is expected to generate 3.41 times less return on investment than Value Equity. But when comparing it to its historical volatility, Global Bond Fund is 3.06 times less risky than Value Equity. It trades about 0.05 of its potential returns per unit of risk. Value Equity Investor is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,762 in Value Equity Investor on November 9, 2024 and sell it today you would earn a total of 206.00 from holding Value Equity Investor or generate 11.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Bond Fund vs. Value Equity Investor
Performance |
| Timeline |
| Global Bond Fund |
| Value Equity Investor |
Global Bond and Value Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Bond and Value Equity
The main advantage of trading using opposite Global Bond and Value Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Bond position performs unexpectedly, Value Equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Value Equity will offset losses from the drop in Value Equity's long position.| Global Bond vs. Morningstar Municipal Bond | Global Bond vs. Lord Abbett Intermediate | Global Bond vs. Federated Muni And | Global Bond vs. Aig Government Money |
| Value Equity vs. Gmo Quality Fund | Value Equity vs. Transamerica Funds | Value Equity vs. Auxier Focus Fund | Value Equity vs. Issachar Fund Class |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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